Annabelle forms a corporation in which she is the sole shareholder. She transfers $$20,000$ cash plus land with a $$100,000$ adjusted basis and a $$160,000$ FMV in

exchange for all the stock of the corporation. The corporation assumes the $$140,000$ mortgage on the land. What is her basis in the stock, and what is the gain she

must report $($if any$)?$

Multiple Choice

Gain of $$20,000$; stock basis is $$120,000.$

No gain; stock basis is $$120,000.$

Gain of $$20,000$; stock basis is zero.

No gain; stock basis is $$100,000.$